* S&P; 500 index rises to highest level since early May
* U.S. oil futures hover above $93 a barrel
* U.S. retail sales boost risk appetite
* European economic contraction feeds hopes for stimulus
By Richard Leong
NEW YORK, Aug 14 (Reuters) – World stocks and oil prices
rose on Tuesday, as stronger-than-expected U.S. retail sales
data supported risk appetite while tepid growth figures in
Europe underpinned expectations for fresh monetary stimulus.
A rise in U.S. retail sales in July, the first increase in
four months, added to uncertainty in the bond market over
whether growth has slowed to the point at which the U.S. Federal
Reserve is likely to launch a new round of stimulus when it
meets next month, driving down the price of Treasuries.
Prices of German government bonds also fell after data
showed that France and Germany, the euro zone’s two biggest
economies, had withstood a contraction in the currency bloc in
the second quarter.
The U.S. retail sales data propelled gains in the dollar
against the yen and pushed down the price of gold.
The economy of the 17-nation euro zone contracted by 0.2
percent in the second quarter, although Germany eked out growth
of 0.3 percent. But even there, a forward-looking sentiment
indicator pointed to poorer performance ahead.
“European markets continue to advance on the lack of
incrementally bad news and the hope for further stimulus by the
ECB,” said Lex van Dam, hedge fund manager at Hampstead Capital,
which manages around $500 million of assets, in London.
The data out of Europe struck a fine balance between keeping
alive expectations for stimulus, without unnerving investors who
are looking for clues over whether the Federal Reserve, the
European Central Bank or both will help their economies with
more bond purchases in a bid to lower long-term interest rates.
The euro zone data followed worrying Chinese trade figures
on Friday and Monday’s report showing a slowdown in growth in
Japan. Both lent support to the view that central banks will be
forced to act as early as next month to boost flagging global
growth.
In the United States, the retail sales gains for July, which
at 0.8 percent marked the biggest increase since February,
followed other data on housing and jobs that have raised hopes
that an earlier economic slowdown may prove to be
temporary.
The Standard & Poor’s 500 index hit its highest level since
May 1. The S&P; has risen for seven of the last eight sessions,
with concerns of risk from Europe’s debt crisis still casting a
cloud.
“Today’s data are supportive of the stock market. That’s a
healthy development,” said David Joy, chief market strategist at
Ameriprise Financial in Boston.
In early afternoon trading, the Dow Jones industrial average
was up 18.67 points, or 0.14 percent, at 13,188.10. The
S&P; 500 Index was up 2.40 points, or 0.17 percent, at
1,406.51. The Nasdaq Composite Index was up 3.52 points,
or 0.12 percent, at 3,026.04.
Top European shares ended up 0.66 percent at
1,101.97 points, after taking their biggest tumble in a week on
Monday. The global MSCI index rose 0.26 percent
to 323.38 points.
Oil prices climbed as the weak European economic data was
slightly less gloomy than anticipated, and ahead of a U.S.
report expected to show a drop in oil stocks.
Brent crude was up 28 cents to $113.88 a barrel
after flirting with its highest level since early May, while
U.S. crude rose 55 cents to $93.29 a barrel.
In the bond market, U.S. Treasuries and German Bund prices
fell as traders reduced their safe-haven holdings in the wake of
the less dire growth data on German and France.
“I don’t expect the Fed will be doing anything for at least
a month and the same for the ECB,” Ameriprise’s Joy said.
German Bund futures were down 67 basis points at
142.51, within striking distance of a one-month low set last
week.
Benchmark U.S. 10-year notes were down 15/32 in
price at 99-4/32 with the yield at 1.719 percent, up 5 basis
points. Earlier, the 10-year yield was close to its 100-day
moving average of 1.7443 percent, which is a technical indicator
that U.S. yields might head higher.
In the currency market, the July improvement in U.S. retail
sales helped boost the dollar against the Japanese yen.
It was up 0.55 percent at 78.74 yen.
The euro was down 0.02 percent at $1.2329.
In precious metal trading, gold fell 0.63 percent to
its lowest level in over a week. It was last at $1,599.10 an
ounce, with investors staying cautious while they wait to hear
more from the central banks about plans to stimulate growth.
